Here is a list of “experts” who were dead wrong on the US housing bubble

The U.S. housing bubble (2001-2007) has precipitated a severe economic crisis, so we at this blog thought it would be useful to “dig in” and search for a list of pundits and “experts” who were dead-wrong on denying any existence of a housing bubble – after all, they were the enablers, and deserve to be held accountable. Fortunately, we found the great Economics of Contempt blog which made our work easier…. so we will list some of them below.

As a side note… this can also be a warning to Brazil. Here is an idea: should we start creating our own list of Brazilian economists, media pundits, and real estate brokers who deny the housing bubble in Brazil? It would be a useful way to start tracking down their calls for future sanity checks. One of the two can happen: they could either be seen as brilliant minds or, more likely, they will end up in a list like the one below. Only time will tell.

Anyway, here are the “brilliant” Americans who got it wrong in 2005/2006 (and their calls):

Alan Reynolds, Cato Institute (2005-06) – “Housing bubble’ worry warts have long been hopelessly confused. It would have been financially foolhardy to listen to them in 2002. It still is.”

Kevin Hassett, American Enterprise Institute (2004) – “Mr. Hassett says there is an ideological component to the belief in bubbles. Liberals, who tend to believe that government must step in to protect people from market imperfections, will likely see more of them. Conservatives, who like their markets unfettered, will see less.”

James K. Glassman, American Enterprise Institute (2005) – “Even in places where prices are soaring, worries of a bubble could be overblown because higher prices appear grounded in good old fundamentals.”

Jude Wanniski, journalist and advisor to Ronald Reagan – (2005) “Unless Greenspan & Company drive interest rates up in order to induce a housing recession, there really is nothing to worry about.”

Jim Cramer, host of CNBC’s “Mad Money” (2003) – “Housing bubble? What housing bubble? The signs are in place for a further run-up in real estate. Breathe easy, mortgage holders. There’s still no place like home.”

Christopher Flanagan, head of ABS research, J.P. Morgan (2005) – “Based on what we know and see in terms of employment and interest rates, it is extremely difficult to see how five years from now we could be looking back and observing a historical 5-year growth rate of, say, less than 5%. That should be more than adequate to support the continued good credit performance of sub-prime mortgage pools.”

Noel Sheppard, economist, Business & Media Institute (2005) – “The increase in real estate values the past five years has not resembled the rapid rise typically seen in a bubble.”

Neil Barsky, Alson Capital Partners, LLC (2005) – “There is no housing bubble in this country. Our strong housing market is a function of myriad factors with real economic underpinnings: low interest rates, local job growth, the emotional attachment one has for one’s home, one’s view of one’s future earning- power, and parental contributions, all have done their part to contribute to rising home prices.”

Chris Mayer, professor of real estate, Columbia Business School, and Todd Sinai, professor of real estate, Wharton School (2005) – “For the past several years, Chicken Littles have squawked that the sky — or the ceiling — is about to fall on the housing market. And it’s tempting to believe them…”Yet basic economic logic suggests that this apparent evidence of a bubble is anything but. Even in the highest-price cities, housing is, at most, slightly more expensive than average.”

Jonathan McCarthy, senior economist, New York Fed, and Richard W. Peach, vice president, New York Fed (2004) – “Home prices have been rising strongly since the mid-1990s, prompting concerns that a bubble exists in this asset class and that home prices are vulnerable to a collapse that could harm the U.S. economy… A close analysis of the U.S. housing market in recent years, however, finds little basis for such concerns. The marked upturn in home prices is largely attributable to strong market fundamentals: Home prices have essentially moved in line with increases in family income and declines in nominal mortgage interest rates.”

Brian S. Wesbury, chief investment strategist, Claymore Advisors (2005) – “These nattering nabobs expect a housing collapse to take down the U.S. economy. But excessive pessimism is unwarranted: Fears of a housing bubble are overblown.”

Samuel Lieber, president, Alpine Woods Capital Investors (2006) – “We don’t see a bubble. Historically, home prices just don’t go down nationwide unless we are in a significant recession. The last time home prices fell nationwide was in 1990. It’s employment that really counts. The underlying fundamentals of real estate are still very positive. Job creation and household formation drive housing.”

Mark Vitner, senior economist, Wachovia (2006) – “‘Everybody is looking for evidence of a housing bubble,’ [Vitner] said. ‘There is not a housing bubble. The supply had not kept up with demand.’”

George Karvel, professor of real estate, St. Thomas University (2005) – “‘There’s no housing bubble,’ said George Karvel, a professor of real estate at the University of St. Thomas. “This is a media-induced frenzy. If I wanted to say there is a housing bubble, I’d have Time and Money magazine camped on my door. They’ve called, and I’ve told them there’s no bubble. Panic sells.”

Margaret Hwang Smith, professor of economics, Pomona College, and Gary Smith, professor of economics, Pomona College (2006) – “Our evidence indicates that, even though prices have risen rapidly and some buyers have unrealistic expectations of continuing price increases, the bubble is not, in fact, a bubble in most of these areas in that, under a variety of plausible assumptions, buying a house at current market prices still appears to be an attractive long-term investment.”

Kathryn Jean Lopez, editor, National Review Online (2005) – “The so-called housing bubble has yet to pop, and likely won’t as long as home ownership remains a tax-advantaged event. Even the New York Times — no parrot of White House talking points — has had to admit that the economy is ‘booming.’”

James F. Smith, director, Center for Business Forecasting (2005) – “There is no evidence of a housing ‘bubble’ in the United States and housing demand should stay strong for years to come.”

John K. McIlwain, senior resident fellow for housing, Urban Land Institute (2005) – “The housing markets will cool as interest rates rise and as affordability declines, but they won’t crash. Most markets will flatten for a while or increase at lower, more historical, rates. A few may decline for a year or two. But we won’t have a crash.”

Carl Steidtmann, chief economist, Deloitte Research (2005) – “When you strip away all of the white noise around a housing bubble, what you find is a robust market for housing that is undergoing several profound changes all of which manifest themselves in higher home price indexes, none of which adds up to a housing price bubble.”